Some suspect that Netflix harbors ambitions to monopolize TV. What would this mean for entertainment?
Big technology firms elicit extreme and conflicting reactions. Investors love them for their stellar growth and vast ambition: the FAANG group of technology stocks, comprising Facebook, Amazon, Apple, Netflix and Alphabet (Google’s parent company), is worth more than the whole of the FTSE 100. Without them to power its growth, America’s stock market would have fallen this year.
Yet the “tech-lash” has also entangled the digital giants in all manner of controversies, from data abuse and anti-competitive behavior to tax avoidance and smartphone addiction. They have become the firms politicians love to hate.
All but one. Alone among the giants, Netflix is a clear exception to this mix of soaring share prices and suspicion. Since its founding in 1997, the company has morphed from a DVD-rental service to a streaming-video upstart to the world’s first global TV powerhouse. This year its entertainment output will far exceed that of any TV network while its production of over 80 feature films is far larger than that of any Hollywood studio.
Netflix will spend $12bn-13bn on content this year, $3bn-4bn more than last year. That extra spending alone would be enough to pay for all of HBO’s programming—or the BBC’s.
The 125m households the company serves, twice as many as it had in 2014, watch Netflix for more than two hours a day on average, eating up a fifth of the world’s downstream internet bandwidth. (China is the one big market where it is not allowed to operate.)
Its ascent has mirrored the decline of traditional television viewing: Americans between the ages of 12 and 24 watch half as much TV today as they did in 2010.
With a share price that has more than doubled since the start of the year, it is as popular with investors as it is with consumers. All of which raises three questions. What are Netflix’s lessons for other media firms? What can the rest of the FAANGs learn from its success? And can it go on keeping everyone happy?
Here, then, is a final lesson that applies to Netflix, and all tech firms. To keep consumers, regulators and politicians happy over the long term, there is no substitute for competition.